Toyota or pakora? India must choose

Narendra Modi says, “Make in India.” Toyota Motor Corp says, stop treating cars as though they were like objectionable items.
The Japanese carmaker has a point about the tax structure being unviable for the industry, and Shekar Viswanathan, vice chairman of the India unit, made it forcefully in an interview
to Anurag Kotoky of Bloomberg News.
However, instead of trying to address the specific concern about the high sin levies on cars, the government turned it into a public relations issue.
The minister for heavy
industries, who also looks after information and broadcasting, took to Twitter to announce that
“the news that Toyota… will stop investing in India is incorrect.”
The additional luxury-tax burden — 1% to 22% depending on the size of the vehicle and engine capacity — is what jacks up the overall levy in the world’s fourth-biggest car market to as much as 50% on some sports utility vehicles.
Six years of headline management should have been enough for Prime Minister Modi’s government. From justifying its bizarre overnight ban on most banknotes in 2016
to defending suspiciously cheerful gross domestic product data and suppressing a not-so-rosy household consumption survey, Team Modi has left no stone unturned when it comes to spinning a narrative in which it’s doing everything right. The longer this pretense continues, the higher the risk of India getting stuck in a post-pandemic sub-5% growth rut.
It’s time to start an honest dialogue with unhappy stakeholders — labor, capital, and subnational governments. Lockdowns are easing even though the coronavirus continues to spread.
Workers desperately want jobs to return because there isn’t much of
a safety net beyond the family or village. Businesses weren’t investing even before Covid. It’s impossible to cut consumption taxes to stoke demand. India’s fund-starved 29 state governments badly need the sin levies that are earmarked for their exclusive use.
Businesses were hoping that these, which are in addition to the regular goods and services tax, would expire as planned in 2022. However, because of the hit to collections this year, they may continue well into the future.

—Bloomberg